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Blockchain In Africa

3/1/2020 -

Blockchain’s highly securitized, cryptographic, and decentralized nature, has the power to serve as a pathway to accelerated growth in less developed nations by increasing customers’ access to and trust in financial institutions. Starting from the 2000s with GSM in Nigeria and M-Pesa in Kenya, the unprecedented speed at which new technologies have been adopted in Africa supports similar expectations for Blockchain based services. From healthcare to payments, blockchain technology can fulfill the unique needs that exist in the developing world.
BitPesa and Wala both use blockchain to provide low-cost financial solutions that stimulate economic activity in the African countries where they currently operate. Despite the enormous social marginal benefit (the benefit minus the cost to society) these financial technology firms stand to produce, they face a lot of resistance from legacy systems and the aged politicians in power.
Founded in 2013 by Elizabeth Rossiello, BitPesa developed with core competencies in international business to business transactions and bitcoin exchange services. It provides a cost and time effective alternative to traditional money transfer services like MoneyGram and Western Union. BitPesa’s mission is to develop innovative financial technology solutions that empower frontier market businesses.Their services help make their customers products more accessible and competitive in international markets by making payments cheaper, faster and easier to process.
With approximately 6,000 users, Bitpesa has generated an estimated $10,000,000 in trade volume per month in 4 of the 7 countries it currently operates. Together with a month over month 20% growth rate in trade volumes and a market size of over 500 million people, the room to grow is promising. In addition, their transferzero solution reduces the risks involved in doing business, because of its KYC and AML compliant screening/monitoring capabilities. Furthermore their BFX platform allows Bitpesa’s clients to offer subscription based services, increasing the channels of revenue for users of their platform. When compared to legacy international transfer platforms in Kenya and Tanzania, the fee charged for each transaction is 4% less, and transactions are processed instantly.
On the other hand, existing monopolies like Safaricom, the owners of M-pesa, have filed lawsuits against Bitpesa which made them switch from the M-pesa to Bitcoin as a medium of exchange. Legislation on Blockchain/ Cryptocurrency exchanges increased as a result of these lawsuits. Moreover, established banks, insured by the Central Bank in the region, developed a blockchain platform based on M-pesa called Pesalinks. With the entrance of new players in this industry posing further threats to the expansion of Bitpesa. Additionally, the presence of fraudulent platforms, like Onecoin and MMM, has created an atmosphere of distrust over the cryptocurrency exchange platforms that are not insured by Central Banks.
Wala is a Business to Consumer incentive-driven free app that allows its users save, send, pay and earn money. Launched in 2017 by Tricia Martinez and Samer Saab, Wala currently operates in Uganda, South Africa, and Zimbabwe, using the Dala token (DALA), a general purpose ERC20 token that facilitates quick and border-less micro-payments at zero fees. Wala’s mission, underpinned by Dala’s decentralized financial system, is to create opportunities, remove barriers and enable prosperity, by providing financial services to 3.5 billion underbanked individuals, 800 million of whom are in Africa.
With the cost of a $200 remittance in Africa at about 9.4% (the highest in the world), the need for a fee free remittance service app is high. In its first four years of operation, Wala has acquired over 100,000 merchants trading on its platform with over 6300 daily transactions. Wala’s noble approach to teaching financial literacy to the masses in less developed nations must be commended. Their strategic approach to incentivizing users to develop healthy financial habits, leads to an increase in usage of their app.
However, Wala’s incentivized approach to financial education may not be scalable, currently Wala’s sole revenue stream is through commissions earned from partnerships with service providers. Additionally, some banks have dropped their partnerships with Wala because of doubts surrounding the sustainability/scalability of their platform. This is also reflected in the lack of trust from investors. Wala was only able to raise 4% of their proposed $30 million in their Initial Coin Offering. The most difficult challenge of all, may be convincing individuals in a cash centric society to go digital.
Despite the tremendous market opportunity for both BitPesa and Wala’s services, and the immense value they can deliver to their customers, to sustain their success, each will, in addition to the challenges described earlier, have to overcome conservative policies that aging politicians, who lack understanding of the power of such initiatives, will continue to promote whilst in public office.
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